question archive Blake Company purchased two identical inventory items
Blake Company purchased two identical inventory items
Subject:FinancePrice:4.87 Bought7
Blake Company purchased two identical inventory items. The item purchased first cost $16.00, and the item purchased second cost $18.00. Blake sold one of the items for $24.00. Which of the following statements is true?
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- Ending inventory will be lower if Blake uses weighted average than if FIFO were used.
- Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used.
- The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.
- Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.
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Answer:
A )
Step-by-Step explanation
Weighted average cost of inventory = (Total inventory cost) / Number of inventory
= (16+18) / 2
= $17
Calculation of amount assigned to ending inventory on the basis of weighted average
Ending inventory = 1* $17
= $17
Calculation of amount assigned to ending inventory on the basis of FIFO
Ending inventory = $18 (the inventory bought first is sold first, so $16 item is sold, so the balance left is second purchased which is $18)
Hence, ending inventory will be lower if Blake uses weighted average than if FIFO were used.
